Hain Celestial Group had plenty of cause to uncork the
champagne when the natural and organic foods powerhouse
celebrated its 20th anniversary Nov. 21.
) had just logged its 14th straight quarter of double-digit
profit growth two weeks before. And if Wall Street is on target,
that trend will continue. Analysts surveyed by Thomson Reuters
see full-year fiscal 2014 profit rising 20% to $3.03 a share and
a 15% increase in fiscal 2015.
Hain is a top maker of natural and organic food and personal
care products in North America and Europe. Its brands include
Celestial Seasonings teas, Terra Chips, Health Valley soups and
cereal bars, and Earth's Best baby food.
Hain has kept sales and profits fat through a steady diet of
acquisitions combined with ongoing product and distribution
expansion that have helped it build muscle in the fast-growing
natural and organic foods arena.
On the acquisition front, Hain has made two recent buys that
analysts see as bringing a lot to the table.
In December it closed on the purchase of the BluePrint brand,
a top player in the raw-juice category.
BluePrint makes raw, organic cold-pressed fruit and vegetable
juices and juice beverages. The line includes BluePrintCleanse, a
raw-juice cleanse program designed to help detoxify the body; and
BluePrintJuice, a line of juice beverages.
The brand posted about $20 million in sales in 2012 and is
expected to be accretive to Hain's earnings in 2013.
The deal, for an undisclosed amount, took Hain into a category
that holds a lot of opportunities, the company says.
"We see great potential with the BluePrint brand as consumers
increasingly seek the benefits of the nutrients, enzymes and
fresh taste of raw juice," said Hain founder and CEO Irwin Simon
in a statement. "BluePrint, a market leading brand that offers
innovative products and programs, provides Hain Celestial with
the opportunity for expansion into the premium raw-juice
What is the brand's potential for growth?
"They purchased BluePrint when it was doing approximately $20
million in sales," said Piper Jaffray analyst Sean Naughton.
"It's very fair to say Hain has demonstrated a track record of
acquiring $10 million to $20 million brands and taking them to
$100 million to $150 million in annual revenue."
Canaccord Genuity analyst Scott Van Winkle calls the BluePrint
deal a "promising and timely acquisition."
"BluePrint is in the premium juice business and one of the
hotter trends is premium juice cleansing in weight loss," he
said. "And BluePrint is a real strong brand in premium juices in
Consumers are interested in consuming more vegetables, adds
Naughton, and BluePrint offers them a way to do that.
A more recent buy came in May with the acquisition of United
Kingdom-based Ella's Kitchen Group for an undisclosed amount.
With the buy, Hain formed the Global Infant, Toddler & Kids
Division under Hain Celestial U.S.
Ella's Kitchen is a maker of premium organic baby food under
its namesake brand and the first company to offer baby food in
convenient flexible pouches. It offers a range of 80 branded
organic baby food products principally in the U.K., the U.S.and
Ella's Kitchen generated about $70 million in sales in 2012
and is expected to be accretive to Hain's earnings in the current
fiscal year 2014 by 5 to 8 cents a share.
The buy complements Hain's Earth's Best line of infant,
toddler and kids products. The Earth's Best brand has grown from
$15 million in sales in 1999 to more than $150 million today. The
brand offers the first and only full line of organic baby food
products with a variety of offerings from jars and pouches to
meals and frozen products, the company says.
"Ella's Kitchen is a very strong organic baby food brand,"
With Ella's Kitchen in the mix -- in addition to Earth's Best
-- Hain now has two of the "dominant" brands in the organic baby
food category, says Naughton. There's a "significant amount" of
distribution opportunities with Ella's Kitchen, he says, adding
that Ella's Kitchen has just expanded intoWal-Mart Stores (
Hain is also rolling out Ella's Kitchen into natural food
stores in continental Europe with a European sales team, Simon
said on the first-quarter conference call.
"That whole category is quite interesting," Naughton said.
He sees expansion opportunities with the two brands beyond
baby food as infants currently using the brands grow older.
He also sees manufacturing synergies between the Earth's Best
and Ella's Kitchen brands.
Both the Ella's Kitchen and BluePrint acquisitions are faring
"Q1 saw our BluePrint and Ella's Kitchen acquisitions combined
to meet both their top- and bottom-line budgets," said Simon on
the conference call. "Importantly, both businesses had strong
consumption growth and expanded distribution. Ella's Kitchen
launched into a large U.S. mass merchandiser and a leading toy
retailer, while BluePrint expanded distribution into test markets
of some leading grocery accounts."
American Health Kick
One key driver of Hain's sales and earnings growth has been
"really robust" internal growth in the U.S., says Van Winkle.
"Hain has been enjoying a very good industry backdrop," he
said. "Natural and organic food industry sales growth has been
exceeding 10% this year in the U.S, and Hain has been keeping
pace with that growth."
Van Winkle estimates internal growth in the U.S. for Hain has
run at about 10% year-to-date.
But international growth has also been a driver, he says.
A significant piece of earnings growth over the past two years
is from last year's acquisitions of Premier Foods and Daniels
Group in the U.K., he says.
Hain acquired Britain's Premier Foods' portfolio of jams and
spreads in a stock and cash deal valued at roughly $320 million
last year. Premier has market-leading packaged grocery brands,
such as Hartley's jams and Sun-Pat peanut butter.
Also last year, it acquired Daniels Group, a marketer and
manufacturer of chilled natural foods in the U.K. Hain paid $230
million in cash plus an unspecified earn-out for the Leeds,
Naughton upgraded Hain to overweight from neutral in
The reason: "We felt that the channel agnostic growth profile
in this industry is very attractive and that Hain is improving
its operating margin, which gives us confidence the investments
they've made are really starting to gain traction."
Hain is the 13th largest company by market capitalization in
IBD's Food-Packaged industry group, which is dominated byNestle (
) andPepsico (
). Hain is its biggest name focused on natural products and has a
market cap of about $3.9 billion, far above the next largest
health food specialistsAnnie's (
) andAmira Nature Foods (ANFI) .
Overall, Hain is faring handsomely on the financial front. In
the most recent quarter, its fiscal 2014 first, earnings climbed
27% to 52 cents a share. Sales surged 33% to $477.5 million.
As for future buys: "I always expect acquisitions from this
company," said Naughton. "They've done 11 since June 2010.
"I would like to see them continue to expand in the U.S. with
brands here. I think there's a ton of runway opportunity in the
domestic market for the category."